Fairfax Financial swings to loss on equity hedges

Reuters Staff

2 Min Read

TORONTO (Reuters) - Fairfax Financial Holdings Ltd (FFH.TO), the Canadian property and casualty insurer run by investment guru Prem Watsa, said on Thursday it fell to a third-quarter loss due to equity hedges that lost money in a rising market.

The Toronto-based company, which is leading a $4.7 billion bid for smartphone maker Blackberry (BB.TO), posted a net loss of $571.7 million, or $29.02 a share, for the quarter ended September 30. That compared with a year-earlier profit of $33.4 million, or 84 cents a share.

The company lost a net $828.6 million on investments during the quarter as rising markets hurt the value of its equity hedges. That compared to a year-earlier net investment loss of $23.6 million.

Fairfax Chief Executive Watsa hedged the company’s stock portfolio in 2010, convinced that global equity markets had further to fall.

He said Fairfax would maintain its equity hedges due to concerns about financial markets and the economic outlook.

“We continue to believe that the mark to market losses will reverse in the future,” Watsa said in a statement.

Since taking over the company in 1985, Watsa has built a reputation as a shrewd investor by moves such as betting against the U.S. housing market and then reaping huge profits when the market collapsed five years ago.

Recently, he’s been a major buyer of BlackBerry stock, and announced last month that Fairfax was leading a consortium bidding $9 a share for the smartphone maker.

BlackBerry’s shares have declined since then, and fell 3 percent to C$8.23 on Thursday on the Toronto Stock Exchange.